The Full Federal Court has unanimously dismissed the taxpayer’s appeal from the decision in Cameron v FCT [2011] FCA 1378 (see 2011 LTN 240 [11]) and confirmed that the AAT had not originally erred in finding that the taxpayer failed the “unrelated clients” test for the purposes of the Personal Service Income rules in Div 87 of the ITAA 1997 in relation to drafting service activities he carried on through his private company. The “offers and invitations” in issue comprised the taxpayer contacting various clients by way of phone or email messages through his personal contacts or relationships in the industry. The years in question were the years ended 30 June 2004, 30 June 2005 and 30 June 2006.
In ruling that the AAT had not erred in finding that these communications did not amount to “making an offer to the public” as required, the Full Federal Court held that on the facts before the AAT, there was no public element to the offers or invitations as the offers did not extend beyond a limited number of persons. In arriving at this conclusion, the Full Court also noted that the taxpayer’s pool of potential clients was large given that he worked for mining, infrastructure, manufacturing and construction companies amongst other industries.
At the same time, the Full Court unanimously allowed the Commissioner’s cross-appeal from the finding at first instance that the AAT had erred in applying the “business premises” test in the way it did (ie merely by reference to the turnover from the drafting business and the ship provedoring business that was conducted by the taxpayer from the premises). In doing so, the Full Court stated the test required a “qualitative” assessment of what the premises were mainly used for and that once it was accepted that the AAT had also taken into account the time spent on the respective businesses, then it could not have been found to have erred in law on this matter – particularly as it was found that the taxpayer carried out most of his work at clients’ premises.
(Cameron v FCT [2012] FCAFC 76, Full Federal Court, Emmett, Middleton and Robertson JJ, 30 May 2012.)
[LTN 104, 31/5]